Notes Are Void, Wallets Are Not!

November 11, 2016
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PM Modi just built a tomb for all those who evaded tax. Those who did not pay heed to the Income Declaration Scheme will now face the blunt of his step. The salaried person is safe and slept peacefully but not the others. Be it any business sector, cash drives majority of the transaction. When people were busy devising strategies for liquidity for the next couple of days, tech startups into payments were busy tapping the market opportunity. As per the IT department, the physical cash circulation in India is Rs 17 lakh crore and out of this, 88 per cent is Rs 500 and Rs 1,000 notes. Official data suggest that 40 per cent of black money is generated in real estate, while stock market and bullion transactions are other big sources. In 2015, investigative agencies and the Reserve Bank of India recovered 6,32,000 fake currency notes worth Rs 30.43 crore. With a threefold objective of curbing black money, addressing counterfeit currency and increasing bank transactions, he has given open opportunity for wallets to tap the market.

The mobile wallet market in India is projected to reach $6.6 billion by 2020, as per the ‘India Mobile Wallet Market Opportunities and Forecast, 2020’ report by TechSci Research. According to a leading consulting company 99% of transactions by volume are done by cash in India. With the step of rendering high denominations as an illegal tender, wallets and UPI are the ones who stand to gain. Non-banking payment solution companies like Paytm and freecharge will see a surge in the volume of transactions. Free guerrilla marketing for Paytm as it was swift in rolling out its notification. “Ab ATM nahin, Patym karo”- is a perfect fit for the cashless economy.

With approval from RBI, to set up services under Bharat Bill Payment System, the NPCI and wallets stand a partnership deal to aid all utility bill payments. One can also pay school’s tuition fee or even for milk at a booth using just a scan code. The 0% transaction fee will further help people in the transition from cash to wallets. Increase of presence in kirana stores and other point of sales is what wallets will look upon now. Tie-ups with ecommerce companies also goes a long way as they are curbing on COD orders and putting upper limits. Banks and financial institutions will integrate their systems with wallets to ensure convenience and expand presence. The very benefit a cashless economy possess is the traceability element. Once money comes online, it is easier to match the income and expenditure of a person leading to investigations in case of discrepancies. It also saves RBI a huge Rs 42000 crores incurred in printing currency.

But will transactions be only on the rise? The scheme is implemented for a period of 2 months, during which citizens will increasingly resort to online modes of payment. But once new 500 and 2000 denominations are floated in ample in the economy, people exchange their currency and are back to the cash zone, this time being monitored, and the growth these wallets gain during the next few days will plummet again. Moreover, one person needs to have multiple wallets to convert his money because pre kyc limit is INR 10,000.

The act of keeping banks closed and making the announcement at 8 pm clearly demonstrates how meticulously and secretively was the operation done. This is not an overnight act but the foundations were laid ever since Modi govt came into power. The Jan Dhan Yojana itself had around 25.45 crores of accounts opened for rural villagers. The DTAA & IDS Scheme, the penalty on real estate transactions exceeding 20,000 and undertaken in cash, the Benami Transaction (Prohibition) Amendment Bill were nothing but a foundation to implement the rendering of Rs 500 and Rs 1000 notes as invalid.

Indeed, Modi’s emerged as the perfect doctor for “the black money” disease dealing with not just the symptoms but ailing it from the grass root level. With all this, an addition required to the government policy of curbing black money is to set up another platform like Income Declaration Scheme wherein people can deposit illegitimate Rs 500 and Rs 1000 notes and get it converted by paying tax or by opening a new window for all those who did not pay heed as an ultimate warning. This will surely go a long way in earning more tax revenues than the IDS Scheme as people now understood they have no shelter to hide black money and all they will be left with is a heap of designed paper.